Diana Chan, chief executive of the European clearing house EuroCCP, has travelled extensively over the course of her 20-year career in financial services, which has included stints in Brussels, Paris, London, New York and Singapore. But one journey stands out.

Diana Chan

Aged only two, Chan and her grandmother fled the People’s Republic of China on a fishing boat during the first years of the country’s Cultural Revolution. Chan’s parents, as descendants of landowners and intellectuals, knew their children were likely to find life hard under the new communist regime and would have more opportunities in Hong Kong. Chan was joined by her brother some years later. He had to swim for five hours to get to Hong Kong, and arrived in the British colony with only the clothes he was wearing.

It is clear that Chan draws strength from these early experiences. She identifies her brother, who now runs his own accountancy practice, as her greatest inspiration. She says she has learnt that in the face of life’s unexpected twists and turns it is important to make the right decisions at the right time, make the most of them and be adaptable.

Chan said: “I have worked in six countries on three continents. I always like where I live, fit right in and become part of the society.”

Positive outlook

A steely resolve and positive outlook helped to take Chan from self-funded studies in Hong Kong on to Harvard Business School’s prestigious MBA programme. She then joined the management training scheme at Morgan Guaranty Trust Company of New York (now part of JP Morgan), and was soon offered a role in the company’s Brussels-based EuroClear business. She has specialised in the arcane world of post-trade services ever since.

It was in 2007, while working for Citigroup, that she became aware of the position at EuroCCP – a division of the US post-trade utility the Depository Trust and Clearing Corporation – and it immediately appealed to her.

Chan said: “When I first heard about the job at EuroCCP I thought it would be a perfect fit, and where everything should come together. It is a start-up, a fantastic opportunity to make a difference and to use my global experience to make the securities market safer for customers.”

As an equities clearing house, EuroCCP stands on both sides of a trade, ensuring it completes in case either party defaults. It came to market at the end of 2007, just as Europe’s trading landscape was being transformed by a slew of alternative share-trading platforms, known as multilateral trading facilities, which were taking the fight to traditional exchanges. These venues helped spawn, in parallel, the creation of low-cost, independent clearing houses – including EuroCCP and the ABN Amro-owned facility, European Multilateral Clearing Facility, or EMCF – to remove a reliance on exchange-owned providers.

EuroCCP went live in August 2008, having won the mandate to clear for Turquoise, the bank-owned MTF. It now sits behind three further venues and was recently signed up by Goldman Sachs to clear for the US bank’s nascent trading venue, Sigma-X.

It capped its rise last October by being named best clearing house at Financial News’ awards for excellence in trading and technology, a “wonderful endorsement by the industry that we’ve done everything right”, according to Chan. From her obvious zeal, it is clear that she has been pivotal in steering the firm’s close-knit team of 30 from start-up to established provider.

She said: “When you lead, you’re setting the direction of the entire team – you need to be positive, encouraging, inspiring and create an environment where everyone can succeed. I love seeing the team succeed in their respective roles – it gives me a great sense of satisfaction.”

But Chan is not one to rest on her laurels – “she never stops,” said a colleague – which is just as well as Europe’s post-trade industry is on the brink of further change.

The explosion in competition among trading venues has highlighted the inefficiencies that remain in clearing, and industry estimates suggest that post-trade fees in Europe are still as much as 10 times more expensive than in the US.

The main reason for these high costs, according to Chan and others, is that trading firms are forced to use clearers chosen by the platform on which they trade. This results in many expensive connections and a fragmentation of capital – given up as collateral – across several providers.

Chan has been one of the leading voices calling for the creation of links among clearing houses, known as interoperability. This has been in the pipeline since 2006 and is expected to improve efficiency by allowing trading firms to choose which clearer they use, irrespective of venue.

She believes the technical and regulatory issues that have stalled interoperability so far are surmountable, but that the process could be delayed further by a reluctance among exchange-owned clearing houses to cede control of where they send a completed trade.

Chan said: “Interoperability is only half of what is necessary; access is also an important part of the equation. Clearing houses don’t have equal access to trade flow – that is controlled by the exchanges which have their own, very valid, business interests – which is the other half of the challenge.”

Nevertheless UK, Swiss and Dutch regulators appear close to approving the process. The effect could be a round of consolidation among clearers to match that being experienced by exchanges.
Greater competition

While EuroCCP has been isolated, according to one trader, having lost out to EMCF on mandates for the two largest MTFs – Chi-X Europe and Bats Europe – its relationship with the user-owned DTCC could prove important. He said: “What they have in their favour is DTCC’s ownership, which means some of the key US banks are still sympathetic for them to succeed.”

Chan is aware of the pitfalls and is certainly ready for the challenge. She said: “It’s a very dynamic environment, and we are in an important phase in the development of the market. We have the chance to get it right, but there is also the risk of getting it wrong.”